Think transformation: 3 questions you need to ask in banking compliance for 2019

    By Lois Engstrand, Marketing Manager at ClauseMatch
    on 5th February, 2019
    The pressure on Compliance to transform and innovate has never been greater. Growing consumer demands of banking services, the overwhelming prevalence of digital transformation across financial services, and an increasing number of regulations are all compounding this pressure.
    "The smarter we become at compliance, the smarter the process will become."
    — This was the message from Nikolay Storonsky, founder and CEO at Fintech unicorn Revolut at a recent event on the future of compliance, co-hosted by ClauseMatch.
    The pressure on Compliance to transform and innovate has never been greater. Growing consumer demands of banking services, the overwhelming prevalence of digital transformation across financial services, and an increasing number of regulations are all compounding this pressure.

    "For too long compliance has been left unchallenged and unchanged. It's outdated and old," said Eric Wu, Head of Compliance Technology at Revolut. "Across the finance industry, there's a lot of hearsay and no facts."

    The message for banking and financial services, it seems, is clear: disrupt or die.

    Although it's not a new message, it's one that carries mounting weight as technology continues to outpace talent in a function that's remained largely unchanged for the past two decades.

    It's a challenge that's impacting the challenger banks too. That's the view of Sandra Quinn, Co-founder and Director of The Compliance Foundation, who says even the most successful fintechs are now struggling with legacy systems and processes as they find themselves several years down the track.

    "There's a lot everyone can learn from each other - I can think of challenger banks already struggling with legacy," said Quinn. "The real focus and pressure from regulators is in retail banking and this is where things really get slowed up. The fintechs can also learn those lessons."

    So how do banking and financial services firms alike ensure their compliance is robust and fit-for-purpose in the year ahead? Here are three questions you should be able to answer from the outset:
    Are you investing in the best people?
    The people challenge in Compliance gets to the heart of one of the biggest barriers to innovation currently facing the function. As Accenture's 2018 Compliance Risk Study found: "76% report a skills gap, which may be preventing ROI".

    Yet investing in better compliance doesn't necessarily mean spending more - it means spending smarter, explained Revolut CEO Nikolay Storonsky. According to Storonsky and his colleague Wu, hiring better people is the number one way retail banks can become smarter with existing compliance budget.
    Are you arming yourself with good technology?
    To evolve in step with regulation, organisations need to arm themselves with the right technology to get the job done. "Technology will be the most impactful strategic investment," according to Accenture.

    The number one challenge in this area is automating financial crime systems, explained Wu.

    "Seasoned compliance people must get comfortable with something they may never have studied, and begin learning about the huge benefits that come from automating financial crime systems," Wu said. "This approach can help financial institutions transform financial crime investigation programs and empower investigators without replacing them," he said.

    For retail banks, it's about investing in AI to overhaul existing systems, while better preventing money laundering and reducing the cost of compliance, Wu added. "Smarter compliance requires humans to make better machines. As we get smarter, we'll be making better machines that improve our processes."
    Are you running alongside the pack?
    Last - but by no means least - you should assess your compliance teams, technology and processes against the market, explained Quinn. "The key is ensuring automation and compliance opens up the time for compliance people to make assessments. It's all about opportunity," she said.

    It's not necessarily about winning the race, but rather ensuring that you're well placed not to be pulling up the rear, Quinn added. "When it comes to Compliance, you don't need to be the fastest in the forest trying to outrun the bear - you just need to ensure you're not the slowest."

    In conclusion, there is no one hard or fast solution to the Compliance puzzle currently facing banking and financial services.

    For retail banks it's about learning to adapt before it's too late; while fintechs face the pressure of continual innovation in order to survive and carry on challenging incumbents, said Wu.

    Regardless of your position in market though, there's one thing Wu says is certain across the board: "The success of financial services companies depends on their ability to take advantage of the innovations that are becoming increasingly available."
    Evolve with compliance:
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